Gold prices in Mumbai’s spot market today fell to Rs 30,405, per 10gm nullifying the impact of last week’s government decision to increase the import duty on gold by two per cent.
Last week, when the increase in import duty was announced, gold prices in Mumbai’s Zaveri Bazaar stood at Rs 30,415 per 10gm.
“There are reasons for the fall in gold prices despite the rise in import duty. One is that the market is trading at some discount to the cost of imports. Some jewellers had imported gold prior to the increase in import duty. They are now selling it at a discount of Rs 150 on the fear that gold prices will weaken further in the coming weeks,” a veteran bullion analyst told Business Standard.
Secondly, the import duty was different for different types of gold bars. For instance, ‘dore’ gold bars (raw gold-pre refined stage) had a duty of five per cent, while refined gold bars attracted a duty of six per cent. This was done to help domestic refineries. Hence, since the last few days, dore bar imports have increased compared to refined gold. Gold refined from that is also selling slightly lower.
Thirdly, the price outlook for gold has also turned weak. “Globally, fund managers have started shifting to equities, which are giving better returns, and are selling gold. Thus, in the near term, gold prices may fall further,” said Ajay Kedia, director, Kedia Commodities.
Kedia believes gold may see a further fall of Rs 1,000-2,000 per 10gm soon as a cumulative impact of fall in global prices, coupled with strengthening of the rupee in the coming weeks. In the futures market spread between current month and far month, gold contract which rose to Rs 730 prior to increase in import duty, has narrowed to Rs 530 per 10gm. A year ago it used to be Rs 330. Clearly, the spread is still high.
Platinum shines again
While gold is weakening, platinum is holding firm. Since the last many quarters, platinum prices were trading around $100 lower than gold, but not anymore.
Platinum has seen some demand and the gap with gold has been filled. Traditionally, platinum used to trade higher to gold. But that trend had changed in the last few quarters.
On 1st October, 2012, platinum traded at $1679 per ounce in the US, while gold was trading at $1775. But today, gold is at $1663 in the US spot market and platinum is at $1669.
In India too, the gap has narrowed. While platinum is not widely quoted in spot physical markets, on the National Spot Exchange, limited e-gold and e-platinum contracts for ready delivery including taxes are quoted at Rs. 32250 per 10 gram and Rs.31370 respectively. Gold is still at some premium to platinum which in the coming weeks is expected to be wiped out.
